Individual Income Tax (Sole Proprietorships)

Statutory Reference

Electronic Services

Definition

The Illinois Individual Income Tax is imposed on every individual earning or receiving income in Illinois. The tax is calculated by multiplying net income by a flat rate. The Illinois Income Tax is based, to a large extent, on the federal Internal Revenue Code (IRC).

Tax Rate

Tax Base

Your Illinois income includes the adjusted gross income (AGI) amount figured on your federal return, plus any additional income that must be added to your AGI. Some of your income may be subtracted when figuring your Illinois base income.

The base income earned in Illinois or while a resident of Illinois is then reduced by the number of federally claimed exemptions and any additional exemptions.

The total exemption amount is deducted from base income to arrive at “net income.” The tax rate is then applied against net income.

Filing & Payment Requirements

The requirements are similar to federal income tax procedures, including withholding and payments of estimated tax.

Return — Your Form IL-1040 filing period is the same as your federal filing period. The due date for calendar year filers is April 15th of the year following the tax year of your return, unless April 15 falls on a weekend or IRS recognized holiday.

Estimated payments — You must make estimated income tax payments if you reasonably expect your tax liability to exceed $500 after subtracting your Illinois withholding, pass-through entity payments, and tax credits for income tax paid to other states, Illinois Property Tax paid, education expenses, the Earned Income Credit, and Schedule 1299-C, Income Tax Subtractions and Credits (for individuals). You will likely need to make estimated payments if your income is either fully or partially exempt from Illinois withholding.

You are not required to make estimated payments if you are 65 years or older and permanently living in a nursing home or a farmer. We consider you a farmer if at least two-thirds of your total federal gross income is from farming.

For most individuals, estimated payments are due April 15th, June 15th, September 15th, and January 15th of the following year. For individuals using fiscal year reporting, payments are due on the 15th day of the fourth, sixth, and ninth months of the fiscal year, and of the first month after the end of the fiscal year. If you must make estimated tax payments, we encourage you to use an electronic payment option. If you choose to pay by check or money order, must complete Form IL-1040-ES, Estimated Income Tax Payments for Individuals, and mail it with their estimated tax payments.

Note: If you pay electronically, do not complete or mail Form IL-1040-ES.

Automatic extension payment — We grant an automatic six-month extension of time to file your return. If you receive a federal extension of more than six months, you are automatically allowed that extension for Illinois. These extensions do not grant you an extension of time to pay any tax you owe. If you determine that you will owe tax, we encourage you to use an electronic payment option to pay any tax you owe to avoid penalty and interest on tax not paid by the due date. You must complete Form IL-505-I, Automatic Extension Payment for Individuals, if you choose to pay by check or money order, and mail it with your extension payment.

Note: If you pay electronically, do not complete or mail Form IL-505-I.